Which of the following statements is INCORRECT regarding the treatment of revenues and expenses for a residence with significant rental use?

Multiple choice question.

Tier $1$ expenses are fully deductible.

Tier $3$ expenses are deductible to the extent that the gross rental revenues exceed both the tier $1$ and tier $2$ expenses.

Tier $2$ expenses are deductible to the extent that the gross rental revenues exceed the tier $1$ expenses.

For tax purposes, rental expenses can NOT exceed rental revenues.